Key Capabilities for Achieving Success in the Digital Economy

Key Capabilities for Achieving Success in the Digital Economy

By Mark Osborn, SAP - 07/18/2017

Why consumer goods companies do what they do has changed. Completely. Irrevocably.

As covered in my previous article, this has occurred for several reasons, but most notably because consumers today can get what they want, when they want it, and wherever they want it. This is a fundamental shift for the industry that’s changing not only what consumer goods companies do, but also why they do it.

Consider that, for the last 50 years, the consumer goods industry has organized itself almost entirely around the core idea of getting a shopper into a store and influencing that shopper to buy something there. But, this is no longer today’s challenge.

Today’s challenge is less about influencing consumers to buy something than it is about helping consumers to achieve something — wellness, security, control, confidence, joy. Consumers want to feel like CGs understand their needs and preferences and are poised to help them by providing informative, contextual, relevant and differentiating experiences directly in their moments of need.

And “what” consumers want is no longer simply a product. Because of the nearly unlimited information, access and choice now available, they want more than simply price and value. This could take the form of content, offers, guidance, community or other things. For these consumers, the store is no longer the physical location where they go to buy; the "store" is now wherever that consumer happens to be. What we used to refer to as "stores" in the physical sense are being redefined as one component of a more holistic effort to assist consumers in achieving an outcome.

Furthermore, consumer engagement, and what companies learn from that engagement, is becoming valuable in and of itself — in some cases, it's even more valuable than what consumers buy. Now, whether or not the consumer buys something is simply one component of a larger engagement exercise. We are seeing new dimensions of value emerging, with engagements themselves enabling new opportunities for differentiation, collaboration and revenue generation.

In the midst of this shifting focus to the consumer, we’re seeing consumer goods companies invest in new and critical key capabilities, including:

Orchestrating Consumer Experiences: Companies are working to create deeply personalized engagements and relationships with consumers through targeted, tailored content, information, offers, social engagement and even community building. These efforts are redefining the consumer engagement lifecycle, enabling CGs to interact in real time while monitoring and responding to rapidly evolving needs, preferences, tastes and trends to not only improve engagement and satisfaction with consumers, but also to influence innovation in their own companies.

Transparency and Traceability: Consumers today associate outcomes such as health and wellness, social responsibility and others with the products they buy. Therefore, they want transparency and visibility into where and how the ingredients and materials that go into those products are acquired, sourced and progressed through various points in the value network. CGs increasingly are investing in opportunities to improve visibility and reinforce trust through innovations in labeling and product information sharing, and are working with trading partners on traceability initiatives.

Direct to Consumer: In general, CGs (and also most retailers) are not yet equipped to ship or deliver products to consumers directly in the expected timespan of 1-2 days. Companies are investing in network re-designs to redefine how they fulfill at individual product levels quickly, while also engaging in backward network redesign to improve flexibility and access to materials and ingredients for faster, more flexible response to dynamic demand.

Last-Mile Logistics: Companies like Uber, Postmates, Deliv and Sidecar are helping create agility for businesses looking to extend their logistics networks. In increasingly urban environments, access and delivery of large quantities of finished goods don’t lend themselves to smaller “stores of the neighborhood” or to individual consumers. By partnering with last-mile logistics companies, CGs are better equipped to meet consumer expectations.

Automation, Collaboration and Intelligence: Artificial intelligence and machine learning are accelerating processes and eliminating costs in complex, error-prone business functions such as manufacturing, demand forecasting and service delivery. These technologies are capable of processing information, identifying patterns and working to mitigate exceptions at rate and accuracy levels well beyond those of humans, providing opportunities to automate and accelerate a variety of processes that help eliminate costs and let headcount be redeployed to more strategic functions.

'Things' as Agents: Things in the world around us — products, smart shelves, delivery vehicles, etc. — are increasingly being embedded with intelligent sensors, enabling them to connect and communicate with consumers as well as with each other. It’s easy to envision a future in which manual and repetitive tasks are delegated to things in the world around us, and where things can communicate, initiate actions and make decisions within set parameters without requiring human intervention.

These are just a few examples of opportunities consumer goods companies are pursuing to win in the new digital economy. In upcoming articles, I’ll dig deeper into each, sharing examples of how CGs are integrating these capabilities into their strategies to help transform the business — along with the industry as a whole.